Buying your first home is a significant milestone. However, without careful preparation to avoid frustrating and sometimes costly mistakes, it can be incredibly challenging.
Homehunting should be an exciting and enjoyable experience. But there are a lot of important aspects to be considered before you even reach for the property pages and get carried away.
So how should you go about it? Well, a strong start is to save yourself some trouble by avoiding these three common mistakes.
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1. Not knowing how much you can borrow
Property viewings are amongst the most exciting aspects of the whole home buying journey. Finding your dream home can feel like you’ve been handed the keys to the chocolate factory. However, your chocolate could quickly melt if you get ahead of yourself.
It is essential to make sure you establish exactly how much you can borrow and look at properties within your means to avoid disappointment further down the line.
Save yourself the disappointment of joining the club of buyers who found their dream home only to realise they couldn’t afford it. Using The Motley Fool’s mortgage calculator is a good first step towards finding out how much you can comfortably borrow.
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2. Not checking your credit score is in great shape
When lenders assess your mortgage application, they want to know how much risk they are taking by lending to you. The tool they use to assess your reliability as a borrower is a three-digit number called a credit score. In simple terms, the higher the score, the better your chance of getting the mortgage you need.
So it is in your best interest to monitor your credit score consistently, in case you need to take actions to improve it.
If lenders consider you a reliable borrower, this will impact the rate they offer you. However, this is not the only thing to consider before you are credit ready. Apps like the FirstHomeCoach offers challenges and missions to help you get ready. So when the time to apply for a mortgage comes, there won’t be any unpleasant surprises.
3. Not maximising your deposit
You’ve probably been saving for a while for your deposit, and you likely still have a way to go. Well, if inflation continues to rise at its current rate your money is in a low-interest savings account, you could have even further to go than you think.
There are government schemes geared towards first-time buyers that can help, like the Lifetime ISA. The current Lifetime ISA allowance is capped at £4,000 in a financial year. Despite that, it makes sense to utilise the full allowance because the government will top up your savings by 25%, which could mean a further £1,000 towards your deposit.
There’s no doubt that buying your first home will involve a number of stresses along the way. So the more you prepare in advance, the less likely are you to make mistakes on your buying journey. As Benjamin Franklin once said, “failing to prepare is preparing to fail.”
